Hedge Funds Are Selling PDL BioPharma Inc. (PDLI)

In this article we will take a look at whether hedge funds think PDL BioPharma Inc. (NASDAQ:PDLI) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

PDL BioPharma Inc. (NASDAQ:PDLI) investors should pay attention to a decrease in support from the world’s most elite money managers in recent months. PDLI was in 14 hedge funds’ portfolios at the end of the first quarter of 2020. There were 19 hedge funds in our database with PDLI positions at the end of the previous quarter. Our calculations also showed that PDLI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

At the moment there are many methods shareholders have at their disposal to assess their stock investments. A pair of the less utilized methods are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the best money managers can beat the S&P 500 by a very impressive margin (see the details here).

Arnaud Ajdler Engine Capital

Arnaud Ajdler of Engine Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a peek at the recent hedge fund action regarding PDL BioPharma Inc. (NASDAQ:PDLI).

What does smart money think about PDL BioPharma Inc. (NASDAQ:PDLI)?

Heading into the second quarter of 2020, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -26% from the fourth quarter of 2019. By comparison, 18 hedge funds held shares or bullish call options in PDLI a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the number one position in PDL BioPharma Inc. (NASDAQ:PDLI), worth close to $23.2 million, amounting to less than 0.1%% of its total 13F portfolio. The second largest stake is held by Silver Point Capital, led by Edward A. Mule, holding a $13.8 million position; 1.6% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism consist of Arnaud Ajdler’s Engine Capital, Ken Griffin’s Citadel Investment Group and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Engine Capital allocated the biggest weight to PDL BioPharma Inc. (NASDAQ:PDLI), around 5.71% of its 13F portfolio. Madison Avenue Partners is also relatively very bullish on the stock, dishing out 1.91 percent of its 13F equity portfolio to PDLI.

Seeing as PDL BioPharma Inc. (NASDAQ:PDLI) has experienced falling interest from the aggregate hedge fund industry, we can see that there lies a certain “tier” of fund managers that decided to sell off their full holdings by the end of the first quarter. At the top of the heap, Noah Levy and Eugene Dozortsev’s Newtyn Management cut the largest position of the 750 funds tracked by Insider Monkey, comprising an estimated $4.9 million in stock, and Bruce Kovner’s Caxton Associates LP was right behind this move, as the fund dumped about $0.9 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 5 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks similar to PDL BioPharma Inc. (NASDAQ:PDLI). We will take a look at MRC Global Inc (NYSE:MRC), Pitney Bowes Inc. (NYSE:PBI), Valhi, Inc. (NYSE:VHI), and CytomX Therapeutics, Inc. (NASDAQ:CTMX). This group of stocks’ market values are closest to PDLI’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MRC 17 20409 -3
PBI 15 32943 -8
VHI 5 1855 -2
CTMX 22 98918 0
Average 14.75 38531 -3.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $39 million. That figure was $77 million in PDLI’s case. CytomX Therapeutics, Inc. (NASDAQ:CTMX) is the most popular stock in this table. On the other hand Valhi, Inc. (NYSE:VHI) is the least popular one with only 5 bullish hedge fund positions. PDL BioPharma Inc. (NASDAQ:PDLI) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately PDLI wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); PDLI investors were disappointed as the stock returned 4.6% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.